Then why don't we make it a consumption progressive tax? I think it is easier to define consumption than income
Easier to track total income for a year, then to track cummulative consumption. And who would collect it? Consumption tax is pay as you go. Income tax you add up at the end of the year. I thought you wanted simple?
Aren't we doing it already in the form of sales tax? The good thing about consumption tax is that only the retail business needs to do the taxes. The consumers don't.
I'm not sure what you're getting at ymc. I'm not aware of too many 'progressive' sales taxes? Where the actual rate is higher for those who consume more. There are taxed, and non-taxed items. Some items subject to higher taxes. But I'm not aware of a system where a tightwad like myself would pay 5% sales tax, whereas a big spender might have to pay 10% or more. And I really can't imagine how such a system would work.
I think with the technology we have now. We can actually tally the consumption of each person for every tax year. So we can do something like this. Tax at a very high consumption tax rate (e.g. 30%). We will still have a monthly tax rebate for tax-free poverty level living. We also have a year end big refund according to a progressive tax system on the total level of consumption. Supposedly then the big spenders will have a smaller year end refund.
So you're replacing the income tax system entirely? I don't know of any tax jurisdiction that's been able to do that. And I'm against it for a variety of reasons. But, if a consumption tax is the way to go...I support a flat rate, with very very few exemptions. Keep it simple! Provide rebates, if you must....but keep the actual charging and collection of the tax as straight forward as possible. And I definitely don't want anyone tracking all my spending for the year. I guess you'd need an ID card before you could buy anything. Talk about privacy issues! And as a business owner...i don't want to be responsible for reporting detailed sales info, by customer, on an annual basis. Could you imagine the complexity of that?
The complexity is only on the retail businesses. According to the Fair Tax book, they recommend the government to compensate the retail businesses for the extra work they do. As to privacy issues, I think it is a trade-off between wanting a progressive consumption tax and personal privacy. Another way to keep progressiveness without privacy issues is to charge extra consumption tax on luxury goods.
One of the issues I have with going to an all consumption tax is that it violates the principle of taxing people at rates which do not correspond to their ability to pay. A family could have high expenditures but not have much income while a dual income no children couple could have low expenditures but have high income. Under a system of taxing only consumption that low income family with high necessary expenditures would be taxed heavily. The dual income no children couple with high incomes would be taxed very little. That doesn't make sense to me. Income tax is still the best means to match taxatation with ability to pay. I suggest a progressive income tax but simplified. Get rid of most deductions. Get rid of most credits. If the government wants to subsidize things they could do it directly and outside of the tax system. (For example if they wanted to subsidize high efficiency vehicle purchases, just offer a govt rebate on it, you don't need to do it thru tax deductions!)
Are you sure about that? Defense spending is around 20-25 percent of the Federal budget. That proposal above would slash revenues by more than half. I would vote for it though=)
You're right about that. A flat tax would basically make the poor even poorer. I don't know but I think a flat tax rate would have to be VERY high to retain the same revenue we do now.
I think there's some confusion here. Percent of GDP. Percent of Federal Budget. 590 bill/9.1 trillion sounds more like percent of GDP. I think it's around 20-25 percent of Federal Budget.
Yeah, so I don't agree with flat consumption tax. I think the best way is to have a two consumption tax rates. One for normal goods and services and a higher one for luxury goods and services. This combines with a consumption tax rebate to keep low income families tax-free will be ideal for me.
weslinder has already admitted his error. 9.1 trillion is the culmulative national debt. It is absurd to divide a culmulative number by a yearly number anyway.
How is it unconstitutional to abolish income tax? The nation didn't even have income tax until the Civil War (1862) many decades after the constitution was written. Heck just because the 16th amendment granted the government the power to tax income doesn't mean that they must. Then of course they could also address the issue by having another amendment that repeals the 16th amendment (see prohibition). Getting rid of income tax would not have the constitution as a major stumbling block.
For those debating the regressive nature of a consumption tax (CT)... The first thing you do is exempt necessities (food, medicine, etc.). This is already in place in most locations that charge sales tax. If I buy a loaf of bread marked at $1.29 at the grocery store, I pay exactly $1.29. Then, to further reduce the impact on the less wealthy, you exempt an amount (for this example, I will use $5000 for adults and $2500 for kids) from sales tax every year. A family of four would have $15000 in CT exemptions in addition to the permanent exemptions noted above. So, it would be fair as everyone would be able to spend the same amount of money before being taxed, but the wealthy would end up paying more in taxes because they will (generally) consume more. The infrastructure already exists and could be easily implemented through credit card swipes that already exist at nearly every retail location. I personally prefer this option as it is very transparent, encourages people to save more than they spend, and gives everyone the ability to choose how much tax they pay every year. In addition, I would also exempt used goods to spur more recycling and create business opportunities for firms that refurbish goods. I believe that eventually, a tax system like this would end up reducing the need for Social Security as people would have more incentives for saving rather than spending. After you have spent your $5000 in exempted sales, everything would have a 25% or so tax, making you think twice about whether you really NEED those $100 boots, that $500 leather coat, or that $30,000+ Hummer.
The income tax is unconstitutional (the 16th Amendment was never really ratified), so abolishing it would be a great thing. It is enforced completely by force, and not by law.
An aspect about consumption tax I am still not quite clear is the foreign corporations. I suppose they are also exempt from any corporate tax just like US companies? As to foreign travelers, I think they can get a rebate when they leave the country just like the VAT system in UK.
